(The Center Square) — Maine's highest court has upheld the state's paid leave law after rejecting a legal challenge from business groups who claimed the payroll tax to fund the program was unfair to employers.
The ruling by the Maine Supreme Judicial Court rejected claims by businesses that the rules set by the state Department of Labor after the law was approved in 2023, which required employers to pay into the system, even if they plan to seek an exemption, amounted to an unconstitutional taking of property. Justices sent the case back to Superior Court for further proceedings.
"The department did not exceed its statutory authority and did not promulgate rules that are contrary to law," they wrote in the ruling, issued Tuesday. "The statute is unambiguous regarding whether the department can require an
employer to remit nonrefundable premiums into the fund while also delaying it from applying to substitute a private plan until the start of the second quarter of 2025."
A lawsuit filed in January by the Maine Chamber of Commerce and Bath Iron Works said the regulations require employers to make "irrevocable" payments into the program through the first quarter of 2025, even if they plan to seek an exemption for offering a similar pay leave plan.
Lawyers for the plaintiffs argued that requiring them to "pay for a system they will never use" constituted a taking of private property for public use under the Maine Constitution or the U.S. Constitution.
But the high court disagreed, saying its review of the regulations determined that the Labor Department was following the intent of the state Legislature when it wrote rules for the paid leave law.
"Nothing in the statute mandates or even anticipates refunds for employers that eventually obtain an exemption from the requirement to remit premiums," justices wrote in the 21-page ruling. "Furthermore, the department’s nonrefundable-premium rule reasonably furthers the Legislature’s directive to implement and develop a fiscally sound fund."
The paid leave program was approved in 2023 as part of a state budget signed by Gov. Janet Mills and covers more than 90% of the state's workforce. Under the program, workers can take up to 12 weeks of paid leave a year, including for the birth of a child, a medical condition or other circumstances.
Workers and businesses with 15 or more employees are required to contribute to the program and split the cost of the new 1% payroll tax, under the rules. The state began collecting the payroll tax to fund the program in January, but the benefits won't be available until next year.
Republicans sought unsuccessfully to defund the new program, saying the payroll tax would hurt workers and employers when many are struggling with higher costs and the ongoing pinch of inflation.
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